Digest Highlights

USDA outlook sees deeper milk production cuts

The USDA’s World Ag Supply and Demand Estimates (WASDE) report reduced milk production forecasts and raised projected milk prices. With the outlook for average corn and soybean meal prices steady, milk income margins should improve.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Released on Nov. 9, the WASDE report cut milk production forecasts on expectations of lower cow numbers and slower growth in milk output per cow. This month, the cuts were much deeper than recent forecasts.

For 2021, the USDA forecasts milk production at 226.4 billion pounds, down 400 million pounds from last month’s estimate and down more than 2 billion pounds from the forecast released in June. If realized, 2021 production would be up about 1.4% from 2020.

Looking into next year, 2022 milk production was forecast at 228.1 billion pounds, down 1.6 billion pounds from last month’s forecast and 3 billion pounds less than the June forecast. If realized, 2022 production would be up about 0.8% from the 2021 forecast.

Compared to a month ago, 2021 price projections were raised for butter, nonfat dry milk and dry whey based on strength in demand and lower expected production. The cheese price forecast for 2021 was reduced slightly due to continued large supplies. As a result, the projected 2021 Class III milk price was cut 10 cents from last month’s forecast to $16.95 per hundredweight (cwt). In contrast, at $16 per cwt, the Class IV price forecast was raised 30 cents. Based on those averages, the 2021 all milk price was forecast a nickel higher at $18.50 per cwt.

Advertisement

For 2022, price forecasts for all dairy products were raised based on strength in demand and lower expected milk supplies. The projected Class III milk price was raised 65 cents to $17.75 per cwt, with the Class IV price projected $1.55 higher at $18.70 per cwt. The all-milk price forecast for 2022 is $20.25 per cwt, up $1.05 from a month ago.

  • Beef outlook: The 2021 beef production forecast was raised from last month, with higher expected slaughter of fed cattle and heavier carcass weights. The total 2022 production estimate was also raised.

Cattle price forecasts for 2021 and 2022 were raised on continued firm demand. Compared to last month’s forecast, projected 2021 annual average prices for fed cattle were raised by 25 cents to $121.30 per cwt. The fourth-quarter 2021 average price was forecast at $128 per cwt, up $1 from last month’s forecast. The price outlook for 2022 was raised $1 to $130 per cwt, with highest prices in the first quarter of the year.

In addition to WASDE supply and demand estimates, feed supply and cost projections, the USDA also released the November Crop Production report, Nov. 9, updating 2021 yield and production estimates. Here’s a summary:

  • Corn: Compared to a month ago, the 2021-22 U.S. corn outlook calls for greater production, increased corn used for ethanol and marginally lower ending stocks.

Latest corn production estimates forecast the harvested area at 85.1 million acres, up about 3% from last year. The forecast yield, at a record high 177 bushels per acre, is also up 3% from last year. Those two factors create a 2021 corn harvest of 15.06 billion bushels, up 7% from last year and the second highest production on record for the U.S.

With use rising slightly more than supply, corn ending stocks were lowered 7 million bushels. That didn’t change the price outlook, however. At $5.45 per bushel, the projected season-average corn price received by producers was unchanged from last month. That would be about 92 cents (20%) more than 2020-21 average of $4.53 per bushel and $1.89 (53%) more than the 2019-20 average of $3.56 per bushel.

  • Soybeans: The 2021-22 U.S. soybean supply and use outlook calls for lower production and exports and higher ending stocks.

Soybean production was forecast at 4.42 billion bushels, down 1% from the previous forecast but up 5% from last year. Based on conditions as of Nov. 1, yields were expected to average 51.2 bushels per harvested acre, up 0.2 bushel from 2020. Area harvested for beans was forecast at 86.4 million acres, unchanged from the previous forecast but up 5% from the previous year.

At $12.10 per bushel, the projected U.S. season-average soybean price received by producers is down 25 cents from last month’s forecast but would be up $1.30 (12%) from the 2020-21 average of $10.80 per bushel and $3.53 (41%) more than the 2019-20 average of $8.57 per bushel. The projected soybean meal price was forecast at $325 per ton, unchanged from the previous month. If realized, it would be down $67.30 from the 2020-21 average but still up more than $25 per ton from 2019-20.

  • Hay and forage: The USDA’s latest Crop Production report did not include updates on dry hay or forage production. September (the latest available) monthly U.S. average prices for Premium and Supreme dairy-quality alfalfa hay jumped $6 from August to $244 per ton and was up $52 per ton from a year ago. It’s the highest average recorded since the USDA began compiling dairy-quality hay prices in 2019. For more on the hay market outlook, read: Forage Market Insights: The cost of business is going up.

  • Cottonseed: The USDA boosted the size of this year’s cottonseed harvest. The 2021 cottonseed crop is now forecast at 5.549 million tons, up about 1.04 million tons (23%) from 2020.

October Class IV milk price highest since November 2014

Federal Milk Marketing Order (FMMO) Class III and Class IV milk prices moved higher in October. In the case of the Class IV price, it’s the highest in nearly seven years.

At $17.83 per cwt, the October 2021 Class III price is up $1.30 from September and the highest since May. It remains $3.78 less than October 2020, however, when USDA pandemic food box purchases of cheese pushed the Class III price to $21.61 per cwt. Through the first 10 months 2021, the Class III milk price averaged $16.86 per cwt, down $1.03 from the same period in 2020.

At $17.04 per cwt, the October 2021 Class IV price is an 83-month high dating back to November 2014. The October 2021 price is 68 cents from September and $3.57 more than October 2020. The January-October 2021 Class IV average is $15.44 per cwt, up $1.92 from the same period a year earlier.

Class III-IV milk prices moved higher due to increases in cheese and butter prices, which drove higher values of both protein and butterfat used in monthly milk price calculations. At about $3.01 per pound, the value of milk protein in October FMMO milk price calculations rose about 41 cents from September and is the highest since May. The value of butterfat rose less than a penny in October to just over $1.94 per pound. Despite the meager increase, it’s the highest since June.

The 79-cent spread between October Class III and Class IV prices was the widest since June, opening the door for some potential depooling. FMMO administrators are scheduled to announce October uniform prices, producer price differentials and pooling volumes beginning about Nov. 11.

DFA’s Smith to retire; Rodenbaugh named successor

Rick Smith, head of Dairy Farmers of America (DFA) for the past 16 years, has announced plans to retire. The DFA board announced the appointment of Dennis Rodenbaugh to the role of president and CEO, effective at the end of 2022.

Rodenbaugh, who has a background in dairy farm management and ownership as well as banking and finance, currently serves as executive vice president and president, council operations and ingredients solutions for DFA. He has led numerous business units since joining the organization in 2007, including DFA’s milk marketing, member services and global ingredient divisions.

FSA county committee elections underway

The USDA Farm Service Agency (FSA) county committee elections are underway. To be counted, producers and landowners must return or mail ballots to their local FSA county office by Dec. 6.  Each committee has from three to 11 elected members who serve three-year terms. Newly elected committee members will take office Jan. 1, 2022.

NMPF presents ‘communication’ awards

Dairy farmer Charles Krause, Buffalo, Minnesota, was named National Milk Producers Federation’s (NMPF) first-ever Farmer Communicator of the Year at the organization’s annual gathering of dairy-cooperative communicators. Associated Milk Producers Inc. (AMPI) earned top overall communications honors among NMPF member co-ops.

USDA provides ‘organic’ pandemic financial support

The USDA will provide pandemic-related financial assistance to cover certification and education expenses to agricultural producers who are certified organic or transitioning to organic. The $20 million outlay will be distributed through the new Organic and Transitional Education and Certification Program (OTECP).

Certified operations and transitional operations may apply for eligible expenses paid during fiscal years 2020, 2021 and 2022 fiscal years. The sign-up period closes Jan. 7, 2022, at local FSA offices.

Visit the OTECP website to learn more.

USDA buys nonfat dry milk, string cheese; seeks UHT milk

It was an active week for the USDA’s Agricultural Marketing Service seeking to fill the needs of domestic feeding programs. The USDA:

  • Awarded contracts to deliver nearly 899,000 pounds of instant nonfat dry milk during the first half of 2022 – all contracts were awarded to Transylvania Vocational Services, Brevard, North Carolina.

  • Awarded contracts to deliver 869,400 pounds of mozzarella part skim string cheese during the first quarter of 2022 – all contracts were awarded to Miceli Dairy Products, Cleveland, Ohio.

  • Is accepting bids for 5.83 million pounds of low-fat (1%) ultra-high-temperature pasteurized fluid milk for distribution during the first quarter of 2022 – bids close Nov. 30.

NMPF, IDFA object to FDA sodium guidance

NMPF and the International Dairy Foods Association (IDFA) are planning to comment on U.S. Food and Drug Administration (FDA) guidance, released Oct. 13. The dairy organizations say the FDA improperly treats sodium’s role in dairy processing as part of voluntary short-term goals to reduce sodium content in commercially processed, packaged and prepared foods.

In 2016, NMPF and IDFA jointly filed comments to address issues in proposed FDA sodium guidance. The organizations informed FDA that sodium plays a complex and multifaceted role in cheesemaking that goes well beyond flavor. The comments called for FDA to remove all cheeses and butter from its guidance.

Things you might have missed

  • Livestock sustainability consultant Jude Capper notes there’s no “silver bullet” in addressing climate change by targeting dairy and beef production. View the YouTube video here.

  • The USDA joined the Pathways to Dairy Net Zero initiative as a formal supporter. U.S. Ag Secretary Tom Vilsack announced the support during the launch of the Agriculture Innovation Mission (AIM) for Climate at the COP26 meeting in Glasgow, Scotland. The effort aims to achieve net zero greenhouse gas emissions by 2050.  end mark